The stamp duty holiday has been extended by Rishi Sunak - everything we know so far
Chancellor Rishi Sunak has extended the stamp duty holiday by three months.
Announcing the extension as part of his Budget on 3 March, the chancellor said the tax break would continue past its proposed end date.
Mr Sunak had been under pressure to push back the deadline as many buyers were rushing to complete their transactions before the deadline.
So, what is the stamp duty holiday – and when will it now end in 2021?
Here’s everything you need to know.
What is stamp duty?
Stamp duty is a tax levied on the purchase of property or land bought in England and Northern Ireland.
It is also known as Stamp Duty Land Tax (SDLT).
The name stems from a tax charged on written legal documents, which historically required a physical stamp to be attached to the paper to show the duty had been paid.
The rate of stamp duty depends on where in the country you are purchasing a property, and what its price is.
The threshold is where stamp duty land tax starts to apply. So, if you buy a property for less than the threshold, there is no SDLT to pay.
While England and Northern Ireland have the same rates, Scotland has its own tax called the Land and Buildings Transaction Tax (LBTT). In Wales, it is the Land Transaction Tax (LTT).
You are able to check how much stamp duty you have to pay using the HM Revenue and Customs’ Stamp Duty Land Tax calculator.
What is the stamp duty holiday?
The stamp duty holiday was a scheme introduced by the chancellor back in July 2020 and it has helped to revive the housing market during the Covid-19 pandemic.
It raised the minimum property price threshold from £125,000 to £500,000.
So, if you purchase a property and it completes before the stamp duty holiday ends, you only have to pay tax on the amount over £500,000.
The holiday meant anyone buying a home for the average English house price at the time of the announcement - which was £254,423 - would pay no stamp duty.
Before, for this price, they would have faced a bill of £2,721.
Why was the holiday introduced?
Rishi Sunak’s stamp duty holiday was a response to a drastic fall in house sales during the coronavirus crisis.
When he made the announcement, the latest published house sales data showed the volume of transactions across the UK had fallen by 65.9 per cent in the 12 months from April 2019 to April 2020.
It was hoped that the tax break would boost the property market and help homebuyers who were suffering financially following the first national lockdown.
Announcing the holiday, Mr Sunak said: "House prices have fallen for the first time in eight years and uncertainty abounds in the market, a market we need to be thriving.
"We need people to be feeling confident - confident to buy, sell, move and improve. That will drive growth, that will create jobs. So, to catalyse the housing market and boost confidence, I have decided today to cut stamp duty.”
Housing transactions boomed at the end of last year driven by buyers rushing to complete deals before the tax break deadline.
Around 129,400 transactions went through in the UK in December, compared with 87,040 in 2014, according to provisional figures from HM Revenue & Customs.
And think tank the Centre for Policy Studies reported that house sales had increased to their highest level since before the 2007 financial crisis.
When does the stamp duty holiday end?
The stamp duty holiday was supposed to end on 31 March 2021.
Thanks to the extension announced by Mr Sunak, the tax break will now continue until 30 June 2021.
Until that date, no stamp duty will be charged on a residential property bought for up to £500,000.
This sum covers the majority of houses and flats in the UK.
It will be kept at double its standard level until the end of September, before returning to usual levels from the beginning of October.
Mr Sunak told MPs: “I can announce today the £500,000 nil rate band will not end on 31 March, it will end on 30 June.
“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from 1 October.”
The Times had previously reported that the tax break would be extended by three months when the chancellor made his Budget announcement.
The Treasury had been repeatedly urged to extend the stamp duty holiday to support the housing market through the rest of the pandemic.
Solicitors and mortgage advisors said house purchases were taking much longer due to current lockdown restrictions, while homebuyers were also concerned that their property transactions could fall through if it ended on 31 March.
The government had previously said the stamp duty holiday was designed to be a “temporary relief”.